In the past year, Beacon has observed a rise in company buying and selling activity. This cycle is beginning to resemble the high price multiple run witnessed from 2005 to 2007. The activity is fueled by the return of the profit, larger companies and other private capital seeing closely held businesses as an alternative means of achieving greater returns on their investments, and banks beginning to loosen their underwriting criteria, unleashing low interest loans.
These trends usually come in waves lasting six to eight years. History dictates that a possible crest to the wave will occur in the next two to three years. Below is a chart that was created by Robert Slee, author of Private Capital Markets, that traces this activity over the past several decades. The results show a surprising repetitive pattern. Following this pattern, one could speculate that baby boomers are on the verge of the next best window for selling their businesses before another recession descends upon us. Missing this window could put many early baby boomers well into their 70s and in a difficult position 10 years from now trying to catch the next cycle in the early 2020s.